Income Tax Slabs & Tax Rates in India for FY 2020-21 (AY 2021-22)

Annual Income Slab Tax Rate Pre Union-Budget 2020 New Income Tax Rate
Up to Rs. 2.5 Lacs No Tax No Tax
Rs. 2.5 Lacs to Rs. 5 Lacs 5% 5%
Rs. 5 Lacs to Rs. 7.5 Lacs 20% 10%
Rs. 7.5 Lacs to Rs. 10 Lacs 20% 15%
Rs. 10 Lacs to Rs. 12.5 Lacs 30% 20%
Rs. 12.5 Lacs to Rs. 15 Lacs 30% 25%
Above Rs. 15 Lacs 30% 30%

The new income tax regime as per Union Budget 2020 offers tax rate reduction from 20% to 10% and from 30% to 20% as per relevant income tax slabs. As a taxpayer, you can choose between the new and the old income tax regime for the FY (Financial Year) 2020-2021. The basic tax exemption limit for an individual will depend on his/her age and residential status. In case you choose the new tax structure, you have to forego about 70 exemptions and deductions such as that from LIC premium, House Rent Allowance, Mediclaim, Education, and others

Here are the 3 categories for individual taxpayers:

  • Individuals (below the age of 60 years). This includes both resident Indians and non-resident Indians.
  • Resident senior citizens (60 years and above but lower than 80 years old)
  • Resident Super senior citizens (over 80 years of age)

In this post, we will discuss the special relief measures for taxpayers given the COVID-19 crisis, deductions and exemptions to forego if you choose the new tax structure, calculation and illustration of income tax as per the new and old regime of income tax slabs and rates, comparison between these two tax structures through simple calculations, and FAQs.

Special Relief for Economic Crisis due to Covid-19

The Covid-19 pandemic has affected not just the Indian economy, but the global economic negatively in many ways. To counter the ill-effects of the same, the Centre announced few relief measures for taxpayers:

  1. Extension of the Deadline for Filing ITR:As per the Government’s announcement, under the Covid-19 Relief Atmanirbhar Rs. 20 Lac Crore Package May 2020, the due date for:
    • Income Tax Returns for FY19-20 is now extended to 30 November, 2020 from 31 July, 2020.
    • This announcement was made on 13 May, 2020.
  2. Reduction on TCS and TDS Rates: The Centre also reduced the Tax Deducted at Source (TDS) rates for non-salaried people. This move is to increase disposable funds in the hands of taxpayers. (Refer the FAQs section for detailed TDS and TCS rates)
    • The TCS rates and TDS for specified payments to residents are lowered by 25% than the existing rates.
    • These changes will come into effect from 14 May, 2020 and remain valid till 31 March, 2021.
    • TDS on Fixed Deposit (FD) interest paid by a bank will now be at 7.5% than the earlier 10%.
    • A tenant can deduct the TDS on monthly rent above Rs 50,000 at 3.75% than the earlier 5%.

Exemptions and Deductions to Forego to Avail the New Income Tax Regime FY20-21

For the Financial Year 2020-2021, you can choose between the old and the new income regime. If you choose the new tax structure, here are the some of the common deductions and exemptions you need to forego:

  • House Rent Allowance or HRA
  • Leave Travel Allowance or LTA
  • Relocation Allowance
  • Conveyance Allowance
  • Standard Deduction
  • Daily Expenses in the Employment Course
  • Professional Tax
  • Helper Allowance
  • Interest on home loan (Section 24)
  • Children Education allowance
  • Other Special Allowances [Section 10(14)]
  • Chapter VI-A Deduction (80C,80D, 80E etc. except Section 80CCD (2) and 80JJA)

Do note that the option to exercise the choice between old and the new tax regime should be on or before the due date of filing ITR for AY (Assessment Year) 2021-22. You can withdraw the option (whichever of the two) exercised only once, if you have a business income. If you withdraw the option, you can never opt-in for the forgone option again.

How to Calculate Income Tax 2020-21 in India?

Income tax is India is calculated based on different tax rates applicable to different income groups. The income accountable is the annual gross income, which is then segregated in different slabs. The income tax rate is set as per these annual income slabs. Thus, to calculate income tax, you must know the annual taxable income slab you fall in, the tax rate, and the provisions of various Sections of the Income Tax Act that offer exemptions and deductions.

Below, we have discussed the income tax slab and rate as per the latest Budget 2020 announcement:

  1. Income Tax Slab for Individuals and HUF below 60 Years of Age
  2. Here are the details:

    Annual Income Slab New Income Tax Rate FY 2020-21, AY 2021-22 Old Income Tax Rate FY 2019-20, now optional from FY2020-21
    Up to Rs. 2.5 lacs No Tax No Tax
    Over Rs. 2.5 lacs to Rs. 5 lacs 5% 5%
    Over Rs. 5 lacs to Rs. 7.5 lacs 10% 20%
    Over Rs. 7.5 lacs to Rs. 10 lacs 15% 20%
    Over Rs. 10 lacs to Rs. 12.5 lacs 20% 30%
    Over Rs. 12.5 lacs to Rs. 15 lacs 25% 30%
    Over Rs. 15 lacs 30% 30%
    Rebate Under Section 87(A) 100% tax rebate subject to up to Rs. 2,500 for a resident individual whose total income per annum is not above Rs. 3.5 lacs 100% tax rebate subject to up to Rs. 2,500 for a resident individual whose total income per annum is not above Rs. 3.5 lacs
    • Under the new tax slab, the total reduction in tax liability for a person earning Rs. 7.5 lacs annually are up to Rs. 25,000. The same is up to Rs. 75,000 for an individual with annual income of Rs. 15 lacs and above. But the actual savings could go lower if the impact of foregoing exemptions is counted for the new tax structure.
    • Under the old income tax regime, a rebate of Rs. 12.500 is available. The same amount is rebate is also prevalent in the new income tax regime for those whose annual taxable income is not over Rs. 5 lacs.
    • Cess at 4% of tax is applicable for both the old and new tax regime. Also, surcharge at 10% and 15% is applicable for annual income over Rs. 50 lacs and over Rs. 1 crore, respectively.
  3. Income Tax Slab for Senior Citizens (After 60 Years but Less Than 80 years)
  4. Here are the details:

    Annual Income Slab New Income Tax Rate FY 2020-21, AY 2021-22 Old Income Tax Rate FY 2019-20, now optional from FY2020-21
    Up to Rs. 3 lacs No Tax No Tax
    Over Rs. 3 lacs to Rs. 5 lacs 5% 5%
    Over Rs. 5 lacs to Rs. 7.5 lacs 10% 20%
    Over Rs. 7.5 lacs to Rs. 10 lacs 15% 20%
    Over Rs. 10 lacs to Rs. 12.5 lacs 20% 30%
    Over Rs. 12.5 lacs to Rs. 15 lacs 25% 30%
    Over Rs. 15 lacs 30% 30%
    Rebate under section 87(A) 100% tax rebate subject to up to Rs. 2,500 for a resident individual whose total income per annum is not over Rs. 3.5 lacs 100% tax rebate subject to up to Rs. 2,500 for a resident individual whose total income per annum is not over Rs. 3.5 lacs
    • Under the old income tax regime, a rebate of Rs. 12,500 is available for all income slabs. In the new tax structure, this rebate amount is only available for those with an annual income of up to Rs. 5 lacs.
    • Cess at 4% of tax is for both the old and new tax structure. The surcharge is at 10% and 15% on the income over Rs. 15 lacs and over Rs. 1 crore, respectively.
  5. Senior Citizens Tax Slab (Age More Than 80 Years)
  6. Here are the details:

    Annual Income Slab New Income Tax Rate FY 2020-21, AY 2021-22 Old Income Tax Rate FY 2019-20, now optional from FY2020-21
    Up to Rs. 2.5 lacs No Tax No Tax
    Up to Rs. 5 lacs No Tax No Tax
    Over Rs. 5 lacs to Rs. 7.5 lacs 10% 20%
    Over Rs. 7.5 lacs to Rs. 10 lacs 15% 20%
    Over Rs. 10 lacs to Rs. 12.5 lacs 20% 30%
    Over Rs. 12.5 lacs to Rs. 15 lacs 25% 30%
    Over Rs. 15 lacs 30% 30%
    • Cess at 4% of tax is for both the old and new tax structure. The surcharge is at 10% and 15% on the income over Rs. 15 lacs and over Rs. 1 crore, respectively.
  7. New Income Tax Slab for Domestic Companies and Firms
  8. Here are the details:

    Tax Head Domestic Companies Firms
    Income Tax for annual turnover up to Rs. 400 crores 25% 30%
    Income Tax for annual turnover over Rs. 400 crores 30% 30%
    Surcharge as % of the Income Tax • 7% of tax if the annual income is over Rs. 1 crore but less than Rs. 10 crores. • 10% of tax if the total annual income is over Rs. 10 crores. • 12% of tax if the total annual income is over Rs. 1 crore
    Cess as % of Tax and Surcharge 3% of tax + surcharge 3% of tax + surcharge

Illustration of Income Tax Calculation as Per the New Tax Regime FY2020-21

For instance, your total annual income is Rs. 16 lacs for FY 2020-2021. Now, your employer contributes Rs. 60,000 for that FY to the NPS account. The NPS account contribution is eligible for tax deduction under Section 80CCD (2).

  • Thus, the taxable income after this deduction is Rs. 16 lacs minus Rs. 60,000 = Rs. 15,40,000. The tax will be now calculated on Rs. 15.40 lacs.
  • No tax applies on Rs. 2.5 lacs. Thus, the taxable income will now be Rs. 15.40 lacs minus Rs. 2.5 lacs, which is Rs. 12.90 lacs.
  • Now, the next Rs. 2.5 lacs are exempted from Rs. 12.90 lacs (Rs. 5 lacs minus Rs. 2.5 lacs exempted). 5% will be applicable as income tax on this income. The tax amount will be Rs. 12,500.
  • The taxable income left is Rs. 10,40,000. The next Rs. 2.5 lacs are taxed at 10%. This amount is Rs. 7.5 lacs minus Rs. 5 lacs. The tax amount for this is now Rs. 25,000.
  • The total tax liability given the above-mentioned incomes is Rs. 0 + Rs. 12,500 + Rs. 25,000 = Rs. 37,500.
  • At this point, the taxable income is Rs. 7,90,000. The next Rs. 2.5 lacs (Rs. 10 lacs minus Rs. 7.5 lacs) bears 15% tax, so Rs. 37,500 is the tax liability.
  • The total income remaining for taxation is Rs. 5,40,000. The next Rs. 2.5 lacs, which is Rs. 12.5 lacs minus Rs. 10 lacs, bears 20% tax. So, Rs. 50,000 is the tax liability.
  • Now Rs. 2,90,000 is the total income left for taxation. The next Rs 2.5 lacs, which is Rs. 15 lacs minus Rs. 12.5 lacs, is taxed at 25%. So, Rs. 62,500 is the total tax liability.
  • After this, the total taxable income left is Rs. 40,000. This income is taxed at 30%. So, Rs. 12,000 is the total tax liability.
  • Thus, as per the new tax regime and the given example, the total tax liability is Rs. 0+ Rs. 12,500+ Rs. 25,000+ Rs. 37,500 + Rs. 50,000 + Rs. 62,500 + Rs. 12,000 = Rs. 1,99,500.
  • Education and health cess are added to this at 4% rate. So, Rs. 7,980 is the total cess amount. The total tax liability stands at Rs. 2,07,480.

Comparison Between New and Old Income Tax Regime

Below we will discuss about New Tax Regime FY2020-21 and Old Income Tax Regime:

  1. Here is an instance. You are a salaried individual who claims deductions under HRA, Section 80C, and Section 80D.
  2. Available exemptions and deductions under Section 80C is up to Rs. 1.5 lacs, under Section 80D up to Rs. 25,000, standard deduction up to Rs. 50,000. HRA (House Rent Allowance) exemption varies at each income level.

    • HRA exemption is Rs. 1.5 lacs for annual gross salary of Rs. 7.5 lacs.
    • The same is Rs. 2 lacs and Rs. 2.5 lacs for gross annual salary of Rs. 10 lacs and Rs. 12.5 lacs.
    • House Rent Allowance is Rs. 3 lacs and Rs. 4 lacs for annual gross salary of Rs. 15 lacs and Rs. 20 lacs.

    Here is the tax benefit for this scenario:

    Gross Annual Salary Tax Payable as Per New Tax Structure Tax Payable as Per Old Tax Structure Tax Savings
    At 7.5 lacs Rs. 39,000 Nil Rs. 39,000
    At 10 lacs Rs. 78,600 Rs. 28,000 Rs. 49,400
    At 12.5 lacs Rs. 1,30,000 Rs. 70,200 Rs. 59,800
    At 15 lacs Rs. 1,95,000 Rs. 1,11,800 Rs. 83,200
    At 20 lacs Rs. 3,51,000 Rs. 2,34,000 Rs. 1,17,000
  3. If you want to claim deductions under Section 80D and 80C, and the standard deduction.
  4. The deduction under Section 80D and Section 80C is Rs. 25,000 and Rs. 1.5 lacs, respectively, whereas standard deduction is Rs. 50,000. Together, the total tax deduction you can claim is Rs. 2.25 lacs.

    Here is the tax benefit for this scenario:

    Gross Annual Salary Tax to Pay as Per New Tax Regime Tax to Pay as Per Old Tax Regime Tax Savings
    At Rs. 7.5 lacs Rs. 39,000 Rs. 18,200 Rs. 20,800
    At Rs. 10 lacs Rs. 78,000 Rs. 70,200 Rs. 7,800
    At Rs. 12.5 lacs Rs. 1,30,000 Rs. 1,24,800 Rs. 5,200
    At Rs. 15 lacs Rs. 1,95,000 Rs. 2,02,800 Rs. 7,800
    At Rs. 20 lacs Rs. 3,51,000 Rs. 3,58,800 Rs. 7,800
  5. If you want to claim standard deductions only.
  6. Here is the tax benefit for this scenario:

    Gross Annual Salary Tax to Pay as Per New Tax Regime Tax to Pay as Per Old Tax Regime Tax Savings
    At Rs. 7.5 lacs Rs. 39,000 Rs. 54,600 Rs. 15,600
    At Rs. 10 lacs Rs. 78,000 Rs. 1,06,600 Rs. 28,600
    At Rs. 12.5 lacs Rs. 1,30,000 Rs. 1,79,400 Rs. 49,400
    At Rs. 15 lacs Rs. 1,95,000 Rs. 2,57,400 Rs. 62,400
    At Rs. 20 lacs Rs. 3,51,000 Rs. 4,13,400 Rs. 62,400

Frequently Asked Questions about New Income Tax Slab and Rate FY2020-21

Here are the FAQs on Budget 2020 Income Tax changes for FY2020-21:

  • add1. How to save tax if your annual income is up to Rs. 5 lacs?

    If your annual income is up to Rs. 5 lacs then you may not have to pay any income tax. This is because of the tax rebate facility (under Section 87A) for salaried individuals. This rebate is up to Rs. 12,500.

  • add2. What is the income tax rate as per old tax regime, which you can choose to continue with in FY2020-21?

    As per the Budget 2020, you can choose to select the old tax regime, if not the new tax rate. The income tax calculation is done in the following manner in this scenario:

    • For annual income up to Rs. 2,50,000 there is no tax for individual below 60 years of age.
    • In the same criteria for income over Rs. 2,50,001 and up to Rs. 5,00,000, the tax rate applicable is 5%.
    • The tax rate is 30% for annual income over Rs. 5.00,001 and up to Rs. 10,00,000.
    • The tax rate is 30% for annual income over Rs. 10,00,000.
  • add3. As per the new income tax regime FY20-21, what are the income tax slabs and associated tax rates?

    Here are details about the new Income Tax regime FY20-21:

    • Up to annual income Rs. 2.5 lacs there is no income tax
    • Over annual income Rs. 2.5 lacs to Rs. 5 lacs, the tax rate is 5%
    • Over annual income Rs. 5 lacs to Rs. 7.5 lacs, the tax rate is 10%
    • Over annual income Rs. 7.5 lacs to Rs. 10 lacs, the tax rate is 15%
    • Over annual income Rs. 10 lacs to Rs. 12.5 lacs, the tax rate is 20%
    • Over annual income Rs. 12.5 lacs to Rs. 15 lacs, the tax rate is 25%
    • Over annual income Rs. 15 lacs, the tax rate is 30%
  • add4. Can you choose between the new and old income tax regime in every financial year?

    You can choose between the old and the new tax structure every financial year if you do not have business income, but are a salaried individual.

  • add5. What is the limit for standard deduction?

    The limit for standard deduction is Rs. 50,000 for salaried individuals.

  • add6. What is the senior citizen income tax slab for Assessment Year (AY) 2020-21?

    Here are the respective details:

    Income Slab (Annual) Tax Rate for AY 2020-21 (FY 2019-20)
    Up to Rs. 3,00,000 No tax
    Rs. 3,00,001 to 5,00,000 5%
    Rs. 5,00,001 to 10,00,000 20%
    Over Rs. 10 lacs 30%
    Rebate under section 87(A) 100% tax rebate subject to up to Rs. 2,500 for a resident individual whose total income is not over Rs. 3.5 lakhs.
  • add7. What is the benefit of the new tax slab?

    The new tax slab and rate under the New Tax Regime for FY20-21, is optional. It benefits assesses who are yet to invest/save at tax saving instruments under applicable Sections of the Income Tax Act, 1961. Even those who have availed only few of the common deductions can choose this regime over the old one, and experience its benefits.

  • add8. If you choose the new income tax structure, which deductions and exemptions you need to let go?

    As per the new tax regime proposed in Union Budget 2020, you have to forego all the common tax deductions and exemptions under the Section 80C and Section 80D. But you do not have to forego exemption available from employer’s contribution to National Pension Scheme (NPS) of Section 80CCD (2).

  • add9. What is the surcharge and cess for new tax regime FY2020-21?

    A cess of 4% on tax is applicable on the taxable income. A surcharge is also as per given terms and condition.

  • add10. What is the income tax slab for FY2019-20 for which tax is not applicable?

    The income tax slabs for FY2019-2020 for which no income tax is applicable are Rs. 3 lacs for senior citizens over 60 years of age, and Rs. 2.5 lacs for individuals below 60 years of age.

  • add11. How calculate income tax on salary?

    The income tax on salary is calculated based on your annual salary:

    • Several exemptions are taken into consideration such as Leave Travel Allowance, HRA, home loan interest, education loan, and many others.
    • After the estimate of gross salary, if you have income from other sources such as Fixed Deposit interest, savings account interest, sale of assets, etc, these are added to count the total income.
    • The applicable deductions are then considered to calculate the total taxable income.
    • This is the income on which the income tax rate and cess are then applied to calculate the income tax you need to pay.
  • add12. What are the effective TDS rates from 14 May, 2020 to 31 March, 2021?

    Here are the reductions in TDS rates:

    Payment Type Section under Income Tax Act, 1961 TDS Rate from 14 May, 2020 TDS Rate till 13 May, 2020
    When you get accumulated taxable portion of the Provident Fund Section 192A 10% 10%
    Interest on Securities Section 193 7.50% 10%
    Dividend from Company Shares and Mutual Funds Section 194 and 194K 7.50% 10%
    Interest than that on Securities e.g. FD interest Section 194A 7.50% 10%
    Winnings from lottery, crosswords, and other games Section 194B 30% 30%
    Horse race winnings Section 194BB 30% 30%
    Insurance Commission provided to an individual Section 194D 3.75% 5%
    Life Insurance Policies not exempt under Section 10(10D) Section 194DA 3.75% 5%
    Received brokerage or commission except for Insurance Commission Section 194H 3.75% 5%
    Payment towards purchase of property or land Section 194IA 0.75% 1%
    Rent payment over Rs. 50,000 per month by HUF or individual Section 194IB 3.75% 5%
    Commission or brokerage or payment over Rs. 50 lacs and more to a professional 194M 3.75% 5%
    Cash withdrawal above Rs 20 lacs or Rs. 1 crore 194N 2% 2%
    Professional fee payment and others 194J 1.5% (FTS, certain royalties, and call centres) 7.5% (others) 2% (FTS, certain royalties, and call centres) 10% (others)
    National Savings Scheme deposit payment 194EE 7.50% 10%
    Plant and machinery rent 194- I(a) 1.50% 2%
    Immovable property rent 194-I(b) 7.50% 10%
  • add13. What are the effective TCS rates from 14 May, 2020 to 31 March, 2021?

    Here are the reductions in TCS rates for sale of:

    Receipt Type Section under Income Tax Act, 1961 Reduced Rate from 14 May, 2020 Existing TCS Rate
    Tendu Leaves Section 193 3.75% 5%
    Timber obtained under a forest lease 206C (1) 1.88% 2.50%
    Timber obtained through other mediums 206C (1) 1.88% 2.50%
    Any other forest produces not being tendu leaves/timber 206C (1) 1.88% 2.50%
    Scrap 206C (1) 0.75% 1%
    Minerals, being lignite, iron ore, or coal 206C (1) 0.75% 1%
    Grant of license, lease, etc. of Toll Plaza 206C (1) 1.50% 2%
    Grant of license, lease, etc. of Parking Lot 206C (1) 1.50% 2%
    Grant of license, lease, etc. of quarrying or mining 206C (1) 1.50% 2%
    Motor vehicle over Rs. 10 lacs 206C(1F) 0.75% 1%
    Other goods 206C(1H) 0.075% 0.1% (from 1 October, 2020)
  • add14. What is the new deadline for Vivaad se Vishwas scheme?

    In the wake of Covid-19, the deadline for the Income-tax amnesty scheme is extended to 31 December, 2020 from 30 June, 2020. No additional amount has to be paid for this.